Question

Article Summary Agrowing number of U.S. citizens are going to other countries for elective surgery procedures. Improved quality and significant cost savings abroad have attracted an increasing number of what are being referred to as American medical tourists, especially those who either do not have insurance or whose insurance does not cover the desired procedure. As few as five years ago, Americans tended to travel to countries such as Thailand or Mexico for the procedures, but many are now choosing to go to Europe, where governments and hospitals are now publicizing these services. Many of the procedures being done overseas are joint replacement, and partly in response to the number of patients going abroad for these procedures, programs are being developed to reduce the cost of these surgeries in the United States. Source: Elizabeth Rosenthal, "The Growing Popularity of Having Surgery Overseas," New York Times, August 6, 2013. QUESTION: Refer to the Article Summary. If European governments and hospitals continue to publicize their existing services to American medical tourists and more Americans consider joint-replacement surgery to improve their quality of life, what will happen in the American market for joint- replacement surgery as a result of these two factors? Briefly describe whether supply and/or demand will shift, and what happen to price and quantity after the shift.

Answer 1

Increasing and effective publicity of joint surgery by European hospitals will increase the demand for surgery in Europe, and decrease the demand for surgery in America. In the US market, demand curve will shift leftward, decreasing both price and quantity of surgeries.

In following graph, D0 and S0 are initial demand and supply curves intersecting at point A with initial price P0 and quantity Q0. As demand falls, D0 shifts left to D1, intersecting S0 at point B with lower price P1 and lower quantity Q1.

3 9.